Kashi is Grrrrr-eat!

Kashi is Grrrrr-eat!

Orem, Tina
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One of the biggest business trends of the last 20 years is the boom in organic and natural products. The industry is experiencing double-digit growth, going from a $4-billion to a $14-billion industry in just eight years, and even though studies show most Americans have tried organic foods and beverages, the market is still virtually untapped—organic products are still only 2.5% of total U.S. food sales, according to the Organic Trade Association (OTA).

People buy organic food for lots of reasons and often with nutritional and political expectations. The 2005 Whole Foods Market Organic Trend Tracker, for instance, found that people buy organic foods to avoid pesticides (70.3%), get fresher food (68.3%), and get healthier, more nutritious food (67.1%). The same survey in 2003 noted that 57% believe organic products come from small farms.

THE PARENT TRAP?
That last statistic sits at the root of some intriguing controversy, because the dominant brands in many organic food categories are owned by some of the nation’s largest food producers. For example, Kashi—one of the most popular organic brands on the market—is a product of Kellogg, the same company that makes Frosted Flakes, Honey Smacks, and Rice Krispies. During a January trip to the Co-op we noted that eight brands dominated the granola bar selection: Cascadian Farms, Nature’s Path, Health Valley, EnviroKidz, Kashi, Arrowhead Mills, Barbara’s Bakery, and Bob’s Red Mill. Only three (Nature’s Path, EnviroKidz, and Bob’s Red Mill) could reasonably be considered “small” or “family-owned” companies—the rest are owned by General Mills, Hain-Celestial, Kellogg, and Weetabix. Research on the yogurt section’s dominant brands (Stonyfield, Brown Cow, and Nancy’s) yielded similar information: Nancy’s is a family-owned creamery in Oregon; the other two are controlled by Danone, makers of Dannon yogurt.

It’s hard for consumers to know who owns the organic brands they love, because parent companies often don’t place their names on their subsidiaries’ products. For instance, the Muir Glen Organics and the Cascadian Farms brands, which are owned by General Mills, have “Distributed by Small Planet Foods” on their packaging. However, brand lists are fairly easy to find on parent websites.

BIG DADDIES
Keeping up with the organic-food boom requires three things: tremendous capital investment, good distribution networks, and operational efficiency. Large companies usually have these things as well as the marketing muscle to take products national, making for a relatively easy transition into the organic business. One advantage to all this is that it gives more choices to more consumers, which in turn leads to lower prices.

But critics say that large-scale production of organic grocery items does a disservice to some of the goals of organic agriculture. For example, organic products with a national presence often have to travel a long way to store shelves rather than serve only a local market. There is also a battle raging over the level of influence large producers should have over organic standards. Much of it focuses on the OTA’s effort to change the 2006 Agricultural Appropriations Bill, which now allows certain synthetic substances into food that can still be legally called organic—a move that reflects what manufacturers had already been doing for years, according to William Friedman, the attorney representing OTA. Most major food producers like Kraft and Dean Foods belong to the OTA.

There is also concern that the profits from some organic brands go to parents that don’t align with the socially responsible image promoted by many organic brands. The Back to Nature brand is a good example of this: the brand is owned by Kraft, which is owned by cigarette manufacturer Philip Morris (renamed Altria in 2003). Altria recently announced plans to spin off the Kraft business.

For many organic producers, however, big parents can be a powerful force in advancing organic agriculture. Suppliers, manufacturers, and retailers have been scrambling to enter the organic food business not only because it is more sustainable, but because its 20% to 100% price premiums are very attractive, especially in a business with notoriously low profit margins. “I think a lot of our shoppers intellectually understand that the big boys own some of these companies, and it certainly has been in the news,” said Kelly Wiseman, the general manager of the Co-op, when we asked about the granola bars. “As for where the net profit is going, the good news is that if Kellogg’s makes more money from organics, they will be less likely to push for things like GMO [genetically modified] wheat in Montana and [will] support organic farmers in the farm bill,” says Wiseman. These are big concerns in Montana, because with 230,000 acres of certified organic pasture and cropland, Montana is a big player in the industry. Only Alaska, California, and Texas are bigger, and the four states combined account for nearly 60% of all the certified organic pasture and cropland in the United States.

Wiseman also emphasized that large food companies don’t always lower the quality or ideals of their organic subsidiaries. “These companies do often continue to source from small and mid-sized organic farmers ([Senator John] Tester selling to Barbara’s [Bakery] is one example),” he explains, “So this motivation for supporting them is still partially intact. Also, when the big daddies bought out these companies, they generally stayed committed to keeping the original management team in place. So the same management practices remained, which is a good thing as well.”

FAMILY FEUDS
Even though the notion of "corporatization" may be a looming public relations problem for the organic industry, critics seem to have an uphill battle ahead because organics have become more mainstream than ever: the OTA reports that about half of all organic food is now sold through traditional grocery stores. Even Wal-Mart jumped into the business, announcing last spring that it would put 200 more organic products in its grocery stores.

Ultimately, consumers and their dollars will decide whether who-owns-what matters. When we showed a box of Back to Nature crackers to a small crowd on SuperBowl Sunday and announced that the brand was a subsidiary of a cigarette manufacturer, there was one perfectly ambiguous comment that summarized the sentiment in the room: “There’s nothing wrong with that, that’s capitalism. Plus, smoking is cool.”
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